Judge: Utility customers owed about $1.6B

California utility customers should receive an estimated $1.6 billion from energy wholesalers that manipulated markets at the outset of the state’s 2000-2001 energy crisis, a federal energy regulator has recommended in a case launched by San Diego Gas & Electric.

The findings of an administrative law judge at the Federal Energy Regulatory Commission, or FERC, won praise from state utilities officials Tuesday. The judge sided with the state and three investor-owned utilities in finding that more than a dozen electricity wholesalers artificially drove up energy prices, leading to supply shortages that caused rolling blackouts and forcing billions in overpayments.

If the damages are eventually paid, the refunds and interest would offset customers’ future electric bills.

“The San Diego and California consumers are long overdue this rebate,” said Robert Fellmeth, a professor of public interest law at the University of San Diego Law School who has written extensively on the state’s energy crisis. “This is a lot of money. ... It’s restitution.”

The judge’s recommendation, issued Friday, now goes before FERC. If the commission approves that decision, a court challenge by the energy wholesalers is likely.

“You all have to pray that the people who took part in this manipulation do not go bankrupt in the two to three years that it may take” for appeals to be considered, Fellmeth said.

One of the targeted wholesalers is the Bonneville Power Administration, based in Portland, Ore. Spokesman Michael Hansen said the utility is disappointed with the judge’s conclusion but would offer no other comment until it reviews the case further.

Other electricity wholesalers deemed liable in the judge’s findings could not be reached immediately.

In general, the FERC staff has opposed payments to investor-owner utilities, arguing that they committed many of the same violations attributed to wholesalers during the energy crisis.

This case is one of several that has made its way through years of legal proceedings. It was filed by San Diego Gas & Electric, a subsidiary of Sempra Energy, and joined by Pacific Gas & Electric and Southern California Edison.

In 2010, Sempra Energy and its former trading venture with the Royal Bank of Scotland paid out $400 million to settle allegations that Sempra’s energy traders manipulated the market while its power-generation unit overcharged the state for electricity during the time period in question.

Sempra also had settled accusations brought by federal regulators for $7.3 million in 2003.

In the past decade, about 30 energy sellers have settled with the state for a combined $3 billion in refunds, according to the California Public Utilities Commission.

Another legal complaint, this one covering a later stage of the power crisis, is pending before a different administrative law judge.

The crisis subsided in summer 2001, only after the state had signed $43 billion in long-term power contracts at the height of price inflation and FERC had issued orders imposing a cap on the prices that sellers could charge. The 50 or so long-term deals stabilized prices, but also greatly increased utility bills.

Sempra was largely successful in defending a 10-year, $6.6 billion contract that the state challenged in court, though a jury found that the company lied to state negotiators when the deal was struck.